Mend money mistakes

In the long run, bad money habits can cost you more than you might think. Here are 7 of the most common money blunders, according to experts.

MISTAKE #1: Not setting a specific financial goal.Whether you're saving for retirement, a dream holiday or a vacation home, determine the minimum amount you'll need. Work backward from your goal to discover how much you need to save (or cut back) on a monthly basis.

MISTAKE #2: Not paying yourself first.Make savings a priority not just a matter of whatever is left over at the end of the month. Consider setting up a regular savings plan that will automatically deposit a set amount into your account on a monthly basis. The easiest way to save is when you never see the money in the first place!

MISTAKE #3: Taking out a payday loan.People struggling to juggle bills and expenses sometimes fall into the pattern of relying on a payday loan. A payday loan -- where you cover your loan with a cheque dated to your next payday -- allows you to borrow up to $1,000, usually without a credit check. However, if done on a regular basis, this nasty little habit can be costly indeed. Experts say you could end up paying an annualized interest rate in excess of 60 per cent, the highest lending rate allowable under Canadian law. This is because many shops allow or even encourage rollovers, allowing borrowers to stay current on an outstanding loan by paying a fee instead of paying in full.

MISTAKE #4: Not paying enough attention to credit cards.Pay attention to what your interest rates are for each card. (Department stores and gasoline cards are typically the worst.) Obviously, it's better to pay off the card in full each month, but if this isn't possible, be sure to pay on time to avoid hefty late fees. To ensure that at least your minimum payment is paid on a timely basis, set up an automatic debit with the credit card issuer or use the regular payment feature of your online bill-pay system. Be sure to compare credit card companies to see who charges what. (Check out these credit card rates.)

MISTAKE #5: Not having enough disability insurance.If an injury or illness prevents you from working for a few weeks or months, make sure you have adequate coverage either through your employer or privately held plans. (Read more.)

MISTAKE #6: Neglecting the budget-busters.Even seemingly insignificant purchases can add up, so keep a daily record of what you buy. To reduce impulse buying, avoid shopping when you're feeling bored or down-hearted.

MISTAKE #7: Not doing your research.The more you learn about financial products, the less likely you are to end up overpaying for them. Read free advice on independent sites likewww.360financialliteracy.org.

Photo ©iStockphoto.com/Brad Killer

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